Delivering cost efficiency from sharing resources
This year we established two shared service centres in India to provide quick, simple and cost effective customer contact points for our technology and business operations and data services for our finance and administration functions in seven European markets and across India. We expect to gain significant benefits to help consolidate, standardise and optimise the way we run our operations.
Deliver value and efficiency from scale
Against a background of continual price pressures due to competition and regulation we continually seek to improve our cost efficiency. During the year we reduced our European operating costs by 4% on an organic basis, equivalent to saving over £140 million. We have used the savings to fund investment in customer facing activities and growth areas such as data and enterprise services.
Our cost advantage
Based on external independent benchmarking we have favourable comparative cost positions in many markets. This reflects both our scale as one of the world’s largest mobile communications companies by revenue and our ongoing cost focus.
| Cost position vs competitors | |
|---|---|
| Network: cost to carry a unit of data(1) | Top quartile position |
| Terminals: cost to purchase a handset(1) | Top quartile position |
| General supplies(2) | 4% better than global benchmark |
- Notes:
- AT Kearney Executive Summary Report.
- The Hackett Group’s world class benchmarking.
Our achievements to date
We have been taking advantage of the large scale of our networks. We are sharing base station sites where this makes commercial sense in order to reduce site rental and maintenance costs. We have also renegotiated leases on most of our sites, are standardising the technology we deploy, and have reduced the energy consumption of our sites and switching centres. We are reducing costs in maintenance and field activities in particular through outsourcing.
We use the Vodafone Procurement Company, the central Group procurement function based in Luxembourg, to leverage our scale to achieve better prices, more value and drive standardisation across the business. We have further reduced costs by centralising the purchasing of handsets. Our large size also allows us to drive ethical, health and safety, labour and environmental standards with our suppliers and also to get the best rates on warehousing, inbound and outbound logistics, and repair costs.
Our shared service centres in Hungary, India and Egypt have allowed us to reduce costs as well as deliver better service. Additionally, we have outsourced application development and maintenance to third party providers on multi-year competitive tenders.
Back to topStrategy in action
Over £140m
Reduction in organic European operating costs due to our cost saving
70%
New radio sites deployed this year built as shared sites to reduce operating costs
